Options for your Credit Union’s Internal Audit function explained

The Credit Union Handbook states that; “It is a matter for the board of directors whether the internal audit function is to be performed in-house, through a sharing arrangement between credit unions, or outsourced to a third party service provider having regard to the nature, scale, complexity and risk profile of the credit union.”

Internal Audit Services (IAS) Can Assist Your Credit Union

The Irish League of Credit Unions’ Internal Audit Services Limited (IAS) has been contracted by over 50 credit unions since being formed in 2014 as a wholly owned, but independently operated, company within the ILCU Group. IAS provides a fully outsourced Internal Audit (IA) function.  Full outsourcing involves no local input into the actual audit testing and evaluation, but needless to say, there is much local input in agreeing the audit plan initially, uploading documents onto the IA software platform, providing your responses to the audit recommendations and the implementation of actions to rectify internal control weaknesses. Also, full outsourcing with IAS has the benefits of:

  • Expertise that comes from a service that is exclusive to the credit union sector.
  • Audit work that is subject to peer review by the Institute of Internal Auditors (IIA).
  • Structural independence.
  • Experienced auditors with credit union background and relevant qualifications.
  • Font of shared expertise amongst IAS Team Members.
  • Enthusiasm to share best practice confidentially between credit union clients.
  • Established lines of communication with the regulator.
  • Fee structure that is based on cost recovery only from being a part of the credit union movement.

At the same time, co-sourcing is now being promoted as a viable alternative to full outsourcing.

Co-Sourcing Explained

With co-sourcing, IAS comes to an arrangement with management at an individual credit union, or a group of credit unions (subject to Board approval), to second suitably qualified local staff members to IAS to form a co-operative internal audit function. The audit work would come under the supervision and oversight of a Senior Auditor in IAS and would be undertaken at locations in the seconded staff’s area where they have not performed any day-to-day credit union activity.  That proviso allows seconded credit union staff to act independently and objectively in the performance of their audit duties together with IAS staff and, most importantly, they will be enjoying one of the most rewarding on-the-job learning experiences available in any financial services model.

Co-sourcing is not new.  It forms part of a tried and tested audit methodology that is already in use in many industries and in financial services globally.  The credentials of IAS staff are now firmly established. IAS is proud of the contribution being made to the key foundations of Strong Governance, Risk Mitigation and Operational Efficiency.  Hence the desire to introduce co-sourcing to the credit union movement. IAS believes this is a progressive and efficient model of internal audit provision which synergises perfectly with the co-operative ethos of credit unions.

Co-operation and Co-Sourcing

A credit union plus IAS in a co-sourced arrangement leads to partnering; this drives efficiencies and greater understanding of risks and internal controls.

Co-sourcing has all the benefits of full outsourcing, and more. It will help to construct a vibrant pool of talent with an ability to share and implement best practice across the movement and it will improve co-operation amongst credit unions availing of the services of IAS; a worthy aspiration for any service offering within the movement.  But the piece de resistance has to be the clear efficiencies that flow from such a mutually beneficial arrangement; efficiencies that will drive substantially lower fees and streamline audit output with no diminution in quality assessment and reporting the auditee who, after all, is the key party in all of this.

Benefits for auditees in the co-sourcing model, as cited by major IA service providers who are affiliated to the Institute of Internal Auditors, include:

  • Improved Business Operations and Efficiencies.
  • Access to Specialised Knowledge and Skills.
  • Access to Independent and Objective Insights.
  • Greater understanding of the Components of Risk Assessment.

Aligned to the IAS Vision and Goals

To give you a better idea as to how the credit union ethos is embedded at IAS, below are a selection of the slides recently presented at the ILCU AGM in Killarney. These highlight the IAS Vision and Goals as a specialist provider of internal audit services exclusively to the credit union movement.

 

 

Jacob Berg, Head of Internal Audit, ILCU Internal Audit Services Ltd

01-6146917, [email protected]

Cormac Oates, Marketing Officer, ILCU Internal Audit Services Ltd.

087-2922001, [email protected]